College costs 101: How much does financial aid cover?

Going to college is a dream for many teens — but it comes with a hefty price tag. It wasn’t always like that — in 1950, tuition was only $600 at some schools (that’s $6,000 in today’s dollars). Over the years, the cost of attending college has risen tremendously. And after four years of fall and spring semesters, the dollars add up.

The good news: Thanks to financial aid, many families are able to cover the costs associated with attending college. So, just how much does financial aid cover?

How much does college cost?

It’s no secret that college is expensive. But just how much does a college degree actually cost? According to the College Board’s most recent report, the average price of tuition and fees for the 2021-2022 school year was:

• $38,070 at private colleges

• $10,740 at public colleges (for in-state residents)

• $27,560 at public colleges (for out-of-state residents)

That’s just tuition and fees. Consider room and board, and you’ll have to add a few more thousand dollars. According to the same report, the average price of living on campus for the 2021-2022 school year was:

• $13,620 at private colleges

• $11,950 at public colleges

Given how expensive it is, it’s easy to wonder how the average family pays for college. Well, in the United States, prospective college students can apply for financial aid and receive monetary assistance. 

What is financial aid — and how do I apply?

Financial aid is a type of monetary assistance available to students attending a higher institution. It includes a variety of assistance — like work study, federal student loans, private student loans, financial aid awards and more. Typically, when applying for colleges, students can simultaneously apply for financial aid via the Free Application for Federal Student Aid — otherwise known as the FAFSA.

To apply for financial aid, your family will need to fill out the FAFSA and submit an application before the deadline. Before starting the application, it’s important to have the following information handy:

• Social Security numbers of the student and parents (if the student is a dependent and 24 or younger)

• Student’s driver’s license or state ID number

• Federal tax information, tax documents, or tax returns

• Records of any untaxed income of the student and parents (if the student is a dependent)

• Financial records, including savings and checking account balances and investments

After applying for federal student aid (FAFSA), the student will receive an Estimated Family Contribution (EFC) number on their Student Aid Report. The number represents the student’s federal aid eligibility and how much their family can expect to contribute towards college costs per year. 

For example, if your family’s EFC is $0 — you should expect to contribute $0 towards college costs based on your income and assets. However, even if a student’s EFC is $0, their finalized financial aid package depends on the college. While some schools may offer a full scholarship to cover all college costs, other schools may offer a mix of aid (including student and parent loans) to reduce the out-of-pocket cost to $0. 

Keep in mind that schools aren’t required to meet your EFC, but rather, use the number to determine a financial plan to make college costs more affordable for your family.

What to expect after applying for financial aid

Colleges and universities use the information provided in a FAFSA to determine and distribute financial aid packages to accepted students. After a student is accepted to a school, they’ll typically receive a financial aid package from the school(s). 

Every financial aid package will vary depending on your family’s financial situation. Some packages will offer a mix of grants and scholarships, which don’t need to be paid back. Others will include a mix of federal and state grants, loans and work-study. Any loans will need to be paid back — and depending on the loan — could have low or high interest rates.

Types of financial aid

Some of the most common types of financial aid offerings include:

• Grants — typically need-based and broken down by federal grants, state grants and institutional grants.

• Scholarships — typically merit-based and are broken down by academic scholarships, athletic scholarships, local scholarships, military scholarships and more.

• Loans — this type of aid needs to be paid back (sometimes with interest) and includes different types including private loans, parent loans, subsidized and unsubsidized loans.

• Work-Study — this type of aid is a part-time job opportunity for students to offset college costs.

Once the student has reviewed their financial aid package(s), they can choose to reject or accept some or all of the aid. If they choose to accept, the school’s financial aid office will help process any aid — including scholarships, work-study and loans.

What does financial aid cover?

Financial aid can cover any expenses related to college. That includes tuition and fees, textbooks, technology and more.

Does financial aid cover living expenses?

Yes, financial aid can cover living expenses such as room and board, meal plans, off-campus housing and other costs relating to college.

Does financial aid cover summer courses?

It depends — if you’re planning on taking summer session classes, consider reviewing your financial aid package closely. Sometimes, financial aid can cover summer classes if you choose to allocate some or all of your aid for summer classes. Before enrolling in the summer semester, consider speaking with your college’s financial aid office to ask about different ways to pay for summer classes.

How to prepare for the costs of college

If you add up the average cost of college, you’ll get a whopping total of $51,690 per year for private universities. And for in-state public universities, the total is almost half — at $22,690 per year. So while the average full-time student receives $14,800 in aid, that still leaves $7,890 (or more) to account for.

So, what can you do to prepare for the growing costs of college? 

• Learn about financial aid: How much does financial aid cover? How much can you expect to receive? How to get financial aid to cover costs — like summer classes? (All of which you’ve learned today — way to go 👏🏽)

• Make a financial plan to save and invest for college as early as possible. 

• Consider opening a financial account — like Greenlight's investment account to build a college fund. 

Did you know? Greenlight’s investment accounts let both parents and kids have access to the world of investing.  And no, You don’t have to be a Wall Street whiz to make smart investment decisions. Parents — we’ll give you fund recommendations based on your timeline and college goals. And kids — they’ll get money smarts with our financial literacy content for intelligent investing.

Want in? Start investing with as little as $1 today — and watch all their college dreams come true.

*Average aid taken from the Trends in Student Aid: Highlights College Board report.